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IRS Fresh Start Program Initiative Ways to Settle Back Taxes

The IRS looks at the taxpayer’s income and assets to make a determination regarding the taxpayer’s ability to pay. Yes, the IRS Fresh Start program can be beneficial for small business owners facing back tax debt. Small business owners who owe under $25,000 can set up a payment plan with the IRS with 2 years (24 months) to pay off the debt. The fees are usually added to the monthly payment, so you need to account for that when you calculate how much in total needs to be paid back.

  • When the IRS does not accept an OIC, they usually believe they can collect the whole amount as a lump sum or through a payment agreement.
  • Again, this is just an umbrella term for several of the IRS’s tax resolution options.
  • Clients should read and understand all program materials prior to enrollment, including potential adverse effects on credit rating.
  • Each option has a different procedure, qualifications, and application process.

Here are the most common resolution options under the Fresh Start Program and a look at the qualifications you need to take advantage of these options. You have to consider how much you owe, how much you can afford to pay, and your history of tax compliance. “The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.” Penalty relief Part of the initiative relieves some unemployed taxpayers from failure-to-pay penalties. Penalties are one of the biggest factors a financially distressed taxpayer faces on a tax bill.The Fresh Start Penalty Relief Initiative gives eligible taxpayers a six-month extension to fully pay 2011 taxes. Interest still applies on the 2011 taxes from April 15, 2012 until the tax is paid, but you won’t face failure-to-pay penalties if you pay your tax, interest and any other penalties in full by Oct. 15, 2012.

Why did the IRS decide to launch the Fresh Start Program?

All offers must be fully paid within 24 months of the date the offer is accepted. Taxpayers must prove to the IRS that they cannot reasonably afford to pay their tax debt by gathering specific supporting documentation to use as evidence regarding the state of their financial situation. The US federal government introduced back in 2011 the Fresh Start Initiative in their bid to provide a financial boost to eligible American taxpayers who have current tax debt. The new threshold for requesting an installment agreement has been raised from $25,000 to $50,000.

How does the Fresh Start program work?

Fresh Start is a one-time temporary program from the U.S. Department of Education (ED) that offers special benefits for borrowers with defaulted federal student loans. Fresh Start automatically gives you some benefits, such as restoring access to federal student aid (loans and grants).

To obtain Fresh Start tax relief without IRS interference, a taxpayer must be in Currently Non-Collectible Status. Tax relief through the federal Fresh Start Program is only possible for those who qualify. To meet the IRS Fresh Start Initiative qualifications, you must be able to prove that paying your tax balance would cause significant financial hardship. The IRS Fresh Start Program was launched in 2011 by the IRS to provide relief to qualified taxpayers. This program includes a plethora of options for relief and repayment through payment plans, Offer In Compromise, penalty abatement and more. We negotiate with the IRS so they do not take advantage of what you do not know.

What is the Fresh Start Program?

This status allows you to place payments on hold during periods of financial difficulty. Eligibility is dependent upon showing that paying both living expenses and back taxes will cause undue hardship. This status does not forgive tax debt but delays payment until the taxpayer is back on solid footing. There can also be a different application process depending on the subsection of the program you’re applying for. For example, if you want to apply for an Offer in Compromise, you need to submit the required forms, but they vary based on the program.

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If you have enough in your bank account to easily cover the charge, it may be worth utilizing its services. Your best bet is to work with a company recommended by a friend or family member. If that’s not possible, research online customer ratings for area tax relief companies. To apply, write a letter to your regional IRS office informing it that you’re interested in Fresh Start.

How to Apply for the IRS Fresh Start Program

After reading this article, you should understand that the Fresh Start tax initiative can help people who owe money to the IRS. If you can’t pay your taxes in full, this might be a good option for you. However, you might be hesitant to reach out to the IRS directly, or you might not know how to file your past tax returns.

With lack of tax knowledge, many taxpayers do not take advantage of the options available to them to resolve their tax debt. Once approved, you’ll make affordable monthly payments to the IRS until taxes are paid in full. However, once three direct installment payments are made and the total tax debt balance falls below $25,000, any existing federal tax liens or levies will be removed. People with tax debt have almost always been able to set up payment plans or apply for offers in compromise.

The Fresh Start Program

Here at Ideal Tax, we provide professional guidance to people whose lives have been affected by tax issues. The ability to qualify for the OIC program is your best-case scenario for tax repayment options, as you can reduce your debt and ease your financial situation. However, eligibility guidelines for this method of tax debt reduction are stringent and saved for debt cases. As a first-time debtor, you may also be eligible for a reduction of specific penalties. For example, if you owe less than $25,000 or you can reduce your debts to this amount before starting the program, you may also qualify to have a federal tax lien removed.

  • The Fresh Start program began in 2011, and more recently has expanded to help more taxpayers by offering more flexible Offer-in-Compromise (OIC) terms.
  • You’ll then contact the IRS, fill out several tax documents, and hopefully reach an agreement.
  • The amount of settlement varies depending on a taxpayer’s financial status.
  • As a first-time debtor, you may also be eligible for a reduction of specific penalties.
  • A six-month extension was added for individuals who were unemployed, so that no penalties would be accrued during that time.
  • For this reason, individuals experiencing tax problems should reach out to a tax relief company as soon as possible to take advantage of the IRS Fresh Start Program.

If you can prove that paying your living expenses along with paying your back taxes will cause financial hardship, you may be eligible. These affordable payments are applied directly to reducing the determined tax debt until payments are fully paid. The other good news is that once you are set up with installment payments under an installment agreement, you will no longer receive those nasty IRS collection letters. The IRS raised the threshold for filing a notice of a federal tax lien by doubling it. As a result, the Fresh Start Initiative enables a more graceful approach to tax debt relief while avoiding a tax lien or levy. Generally, an offer will not be accepted if the IRS believes that the liability can be paid in full as a lump sum or through a payment agreement.

This option requires limited financial information, meaning far less burden to the taxpayer. The maximum term for streamlined installment agreements has been raised to six years from the current five-year maximum. Installment agreement
An installment agreement is a payment option for those who cannot pay their entire tax bill by the due date.

  • Since the beginning, our organization was founded with the mission to alleviate taxpayers from the harsh collection policies of the IRS and state taxing authorities.
  • You’ll be required to fill out some forms that explain your financial situation.
  • The right tax relief company will be transparent about their process, experienced in negotiating with the IRS and getting results for their clients, and will center their strategies around you and your financial needs.
  • We aim to protect our clients from the anxiety and suffering that tax debt creates by establishing a structured resolution for tax debt and educating our clients on how to prevent future debts from incurring.
  • If and when an offer is accepted by the IRS, making full payment of that reduced offer amount wipes clean the principal amount owed along with all interest and penalties.

The IRS is the ONLY entity that can approve of an Offer in Compromise. The right tax relief company will be transparent about their process, experienced in negotiating with the IRS and getting results for their clients, and will center their strategies around you and your financial needs. An Installment Agreement is a payment plan offered How Can The Irs Fresh Start Program Help Me? through the Fresh Start Program. It allows taxpayers to pay an agreed-upon amount every month to the IRS. These payments go directly to the taxpayer’s overall tax debt, and continue until the debt is paid in full. Once you are on an installment plan, you will no longer receive IRS collection letters or be susceptible to penalties.

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